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HMRC internal manual

National Insurance Manual

Class 1 NICs: Expenses and allowances: Subsistence payments

Position from 6 April 1998

With effect from 6 April 1998 the NICs treatment of travel and subsistence payments is aligned with the treatment for tax purposes.

From that date necessary travelling expenses include the cost of any subsistence costs which are also necessary and which are attributable to that journey. If an overnight stay is needed then the cost of the accommodation and any meals is part of the necessary travelling expenses. Even where an employee stays away from home on business for some time, if the travel expenses are necessary travelling expenses the cost of meals and accommodation is part of the overall cost of the business travel.

To qualify for exclusion from NICs the subsistence must be part of the necessary qualifying travelling expenses.

See NIM06250 for general guidance on what can be excluded from NICs as necessary travelling expenses.

Position prior to 6 April 1998

Before 6 April 1998 subsistence payments were capable of being excluded from NICs if they could be shown to be specific business expenses. See NIM05020 for guidance on what constitutes a business expense.

An employer might make subsistence payments in various forms. NIC liability depended on how the payment was made:

  • If the employer reimbursed the employee for the actual amount spent the whole amount could be excluded from NICs.
  • If the employer paid a round sum allowance then only the amount which could be identified as an actual business expense could be excluded from liability unless the employer held an IR dispensation. For information regarding dispensations see NIM05500.
  • If the employer made subsistence payments according to scale rates the payments could be excluded from NICs as long as they satisfied the conditions for being accepted as properly constituted scale rate payments intended not to provide any profit. See NIM05680 and NIM06170 for guidance on scale rate payments.